Pfizer is working on two next-generation delivery devices for its inhaled insulin, Exubera — disappointing sales of which have been blamed, in part, on its unwieldy design, which has drawn comparisons to that of a water bong.

Devices in development are much smaller than the current Exubera delivery system, said Martin Mackay, Pfizer’s VP of Global Research & Development, during a breakout session at UBS’s Global Life Sciences Conference in New York today.

Mackay acknowledged that Exubera has been a “disappointment” for Pfizer but contended the company is still “very hopeful” about the product’s ability to help patients.

“This is often the case when you are so novel,” Mackay said. “There’s a good reason it will take many years to nail it (Exubera). We are working through that right now.”

Sales of Exubera were at $4 million for the second quarter of 2007, company figures show.

MacKay did not give a time frame for completion and/or filing of either of the new Exubera devices, but Pfizer would need to be quick on the draw if it wants to compete with Eli Lilly, which yesterday revealed plans to file for a small easy-to-use inhalable insulin device that fits into the patient’s hand, similar to the size of a cell phone.

The Lilly pulmonary drug delivery system for diabetes, based on a technology called “Air,” is being co-developed with Alkermes. It was one of six late-stage products highlighted in a presentation by the Indianapolis-based drugmaker on Tuesday at the UBS Global Life Sciences Conference.

A late-stage trial of Lilly’s inhaled insulin is slated to wrap in time for the firm to submit the product in 2009, said Bryce Carmine, Lilly global brand director.

In June, Pfizer’s president of worldwide pharmaceutical operations Ian Read announced a “full-court press” behind Exubera in an effort to ramp up sales after the drug experienced a delayed launch. The push includes DTC advertising which began this month and specialized sales force support.

Meanwhile, Mackay said Pfizer is also continuing to look for ways to extend the patent life of $12 billion dollar selling cholesterol drug Lipitor through potential combinations or licensings following the failure of the developmental Lipitor/torcetrapib combo last year.

“We had such high hopes for torcetrapib…we are still looking,” Mackay said.

“But the window for being able to do that has narrowed,” he explained.